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KEY NOTE Market Report Recruitment Agencies (temporary and contract): December 2004

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This report covers: recruitment agencies, temporary, and, contract, blue collar, computing and IT, drivers, educational, financial, hotel and catering, nursing, professional and managerial, secretarial and clerical, technical & engineering

Companies covered include: Adecco Holdings UK, The Capita Group, Hays Specialist Recruitment, Manpower, MPS Group International, Nestor Healthcare Group, Pertemps Recruitment Partnership, Reed Executive, Select Appointments, Spring Group,

EXECUTIVE SUMMARY

This report looks at the market for temporary and contract recruitment in the UK. It covers the organisations that recruit people for temporary positions on behalf of clients, whether they call themselves recruitment consultants, recruitment companies or employment agencies.

The market for temporary and contract workers was worth £22.81bn in the year to March 2004, according to the Recruitment & Employment Confederation (REC). Key Note has noticed signs of relief all round the industry as 2004 turned out to be much better than 2003. The major sectors of the market by volume are secretarial/clerical staff, computing/IT professionals and drivers. The strongest sectors in 2004 were driving and secretarial/clerical appointments and demand for IT staff has also been rising. The hotel and catering sector has shown a remarkable improvement. The change in the market follows two very difficult years: 2002 and 2003. Although the market has recovered, there still appears to be some pressure on fee rates; however, profitability has definitely improved.

The recruitment industry is a fragmented one, but there are a group of very large companies that play a significant part in the market: Adecco Holdings (UK) Ltd, The Capita Group PLC, The Corporate Services Group PLC, Hays, Manpower PLC, MSP Group International PLC, Nestor Healthcare Group PLC, Pertemps Recruitment Partnership Ltd, Reed Executive PLC, Select Appointments PLC and Spring Group PLC.

There are still many concerns in the industry. The law relating to temporary workers is becoming ever more complicated with every new case that comes before a court. The industry is also concerned about the EU Agency Workers Directive (AWD), which both the Confederation of British Industry (CBI) and the REC have campaigned against. Another, perhaps more troubling, worry is the growth of online recruitment. Online recruitment, especially by large well-known companies, is on the increase, which is of concern to high-street recruitment companies.

Key Note predicts that the market will increase gradually in value between the years ending March 2005 and 2009. There is optimism in the industry but also caution. The worries about oil prices, interest rates and clients' long-term recruitment intentions lurk in the background. Moreover, the continuing cautious noises coming from the Bank of England — which Key Note alluded to in the previous edition of this report (published in December 2003) — are still being made. Furthermore, the Government's gross domestic product (GDP) forecasts are not as high as they were for 2003 and 2004, and there is the possibility of rising taxes in years to come to pay for the rising budget deficit and the so-called pensions gap. These factors also suggest that there will be value growth in the next 5 years (2005 to 2009) but not be as high as that witnessed between the years ending March 2000 to 2004.

TABLE OF CONTENTS

Executive Summary

1. Market Definition

REPORT COVERAGE

MARKET SECTORS

Temporary Workers

Contract Workers

Recruitment Sectors

MARKET TRENDS

ECONOMIC TRENDS

Population

Table 1: UK Resident Population Estimates by Sex (000), Mid-Years 1999-2003

Gross Domestic Product

Table 2: UK Gross Domestic Product at Current and Annual Prices (£m), 1999-2003

Inflation

Table 3: UK Rate of Inflation (%), 1999-2003

Unemployment

Table 4: Actual Number of Unemployed Persons (million), 1999-2003

Household Disposable Income

Table 5: Average Annual Household Disposable Income per Capita (£), 1999-2003

MARKET POSITION

Table 6: The Temporary and Contract Recruitment Market within the Overall Recruitment Market by Turnover (£bn and %), Years Ending March 1998-2004

2. Market Size

THE TOTAL MARKET

By Value

Table 7: The Temporary and Contract Recruitment Market by Turnover (£bn), Years Ending March 1999-2004

By Volume

Table 8: Number of Temporary and Contract Placements, Years Ending March 1999-2004

BY MARKET SECTOR

Blue Collar

Computing and IT

Drivers

Educational

Financial

Hotel and Catering

Nursing

Professional and Managerial

Secretarial and Clerical

Technical and Engineering

3. Industry Background

RECENT HISTORY

INDUSTRY SYNOPSIS

NUMBER OF COMPANIES

Table 9: Number of UK VAT-Based Enterprises Engaged as Employment Agencies and Consultants by Turnover Sizeband (£000), 2000-2003

EMPLOYMENT

Table 10: Number of UK VAT-Based Local Units Engaged as Employment Agencies and Consultants by Employment Sizeband (number of employees), 2003

REGIONAL VARIATIONS IN THE MARKETPLACE

HOW ROBUST IS THE MARKET?

LEGISLATION

KEY TRADE ASSOCIATION

Recruitment & Employment Confederation

4. Competitor Analysis

THE MARKETPLACE

Table 11: The Top 20 Recruitment Companies in the UK by Turnover from Recruitment Activities, 2003

Table 12: The Top Ten Recruitment Companies by Number of Temporary/Contract Workers, 2003

MARKET LEADERS

Table 13: Selected Leading UK Recruitment Agencies by Total Turnover (£m), 2002/2003

Adecco Holdings (UK) Ltd

Company Structure